1981 (5) TMI 42 - AT - Income Tax

Summary

Issues:
1. Exigibility of capital gains tax on the surrender of tenancy rights.
2. Assessment year for capital gains on the sale of premises at Oyster Apartments.

Detailed Analysis:

1. The first issue pertains to the exigibility of capital gains tax on the surrender of tenancy rights held by the assessee. The Income Tax Officer (ITO) valued the tenancy rights and proposed to tax the same as capital gains. The assessee contended that as the tenancy rights were self-generated and not purchased for consideration, no capital gains tax should be levied. The Commissioner (Appeals) referred to the Bombay High Court's decision in Cooper's Case, which held that no capital gains tax arises when a landlord allots ownership premises to a tenant in exchange for surrendering tenancy rights. The Supreme Court upheld this decision, leading the Commissioner (Appeals) to rule against the department. The Appellate Tribunal upheld this decision, noting that the tenancy right was not purchased and did not involve a monetary cost for the assessee.

2. The second issue concerns the assessment year for capital gains on the sale of premises at Oyster Apartments. The assessee entered into an agreement for sale in September 1975, falling within the accounting year relevant to assessment year 1976-77. However, the actual transfer was completed in the subsequent year after obtaining necessary approvals. The ITO assessed the capital gains for 1976-77, but the Commissioner (Appeals) ruled that the statutory requirements for legal transfer were fulfilled in the following year, 1977-78. The Appellate Tribunal agreed, emphasizing that the transfer was not completed until all formalities were fulfilled, as evidenced by correspondence and documentation. The Tribunal rejected the department's reliance on a different case, emphasizing the unique facts of the present case. Consequently, the Tribunal upheld the Commissioner (Appeals) decision, dismissing the departmental appeal.